The SkyCity Entertainment Group has revealed that its modified earnings before interest, taxes, depreciation, and amortization (EBITDA) for the 2024 fiscal year may decrease, despite prior projections of expansion.
Headquartered in New Zealand, SkyCity stated in a trading update that it anticipates adjusted EBITDA for the 2024 fiscal year to range from NZ$290 million (GBP 141.2 million/EUR 164.6 million/USD 177.1 million) to NZ$310 million. This projection is based on the initial five months of operations in the fiscal year.
SkyCity reported adjusted EBITDA of NZ$310 million in the 2023 fiscal year and had previously predicted moderate growth for the 2024 fiscal year. However, a number of elements have prompted SkyCity to reduce its expectations, potentially leading to a decrease in earnings.
These elements include a decline in electronic gaming machine (EGM) revenue across New Zealand. SkyCity explained that this is due to the negative impact of ongoing cost-of-living pressures and economic uncertainty on consumer spending.
SkyCity also mentioned underperforming results at its Adelaide property in Australia. The weak revenue outlook comes against a backdrop of ongoing legal and compliance cost pressures, and SkyCity is currently examining the cost structure of the site.
The operator also stated that its parking revenue has declined due to the termination of a previous agreement.
SkyCity is preparing for the online gambling market in New Zealand.
The possible influence of online gambling rules in New Zealand has also impacted profits.
SkyCity views the market as a space for expansion, even though any type of law is still in its initial phases. They remain hopeful about the medium-term earnings increase that regulation will bring to the organization.
For the five-month period, SkyCity estimates net earnings after taxes to be between NZ$125 million and NZ$135 million. More details will be given in the 2024 financial year interim results announcement, which will be released in February.
There are worries about a possible halt in New Zealand.
SkyCity made it clear that the guidance does not reflect the effect of a possible halt in New Zealand.
In September, the New Zealand Ministry of Internal Affairs Secretary asked for a temporary suspension of SkyCity’s casino license for about 10 days. This involved subsidiary SkyCity Casino Management Limited, which controls SkyCity’s operating licenses in Auckland, Hamilton and Queenstown, New Zealand.
No decision has been made on the issue.
SkyCity has faced some difficulties in 2023. The operator settled a federal lawsuit with the Australian Transaction Reports and Analysis Centre (AUSTRAC) late last year. This was related to anti-money laundering (AML) failures at SkyCity Adelaide.
The South Australian Gambling Regulator conducted a review of SkyCity, a casino operator, in May to assess its anti-money laundering and counter-terrorism financing program. In August, SkyCity disclosed that it would allocate $45 million to prepare for a possible penalty from the Australian Transaction Reports and Analysis Centre (Austrac).
In October, Michael Ahern, SkyCity’s chief executive, revealed his intention to step down from his position. Ahern will depart the company in March 2024 to return to Europe and spend more time with his family. He has held the role of CEO since November 2020, having previously served as Chief Operating Officer.
SkyCity has initiated the process of finding a new chief executive.